How to Sell Electricity Back to the Grid

Since renewable energy is so efficient, production systems like solar panels and wind turbines produce a lot more electricity than a single entity could ever use. But why would utilities go through the trouble of purchasing this energy?

Well, because the government says so. In the U.S., the Public Utility Regulatory Policy Act (PURPA) dictates that electric utilities on the traditional power grid must purchase the excess electricity that renewable energy systems generate. It's a way of encouraging renewable energy production without requiring utilities to invest in expensive renewable systems themselves.

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While renewable energy producers typically still take some conventionally produced electricity from the grid, they make up for a lot -- if not all -- of what they use by funneling the excess electricity that their own systems produce back into the grid. You can receive compensation for the energy you put into the grid in two ways.

Some small-scale entities or individuals who sell electricity back to the grid receive payment for their contributions from utilities at a wholesale rate, also called avoided cost -- meaning the cost that the utility avoids by buying electricity from you instead of generating it themselves. This deal is called net process and sale, and it uses two unidirectional, or one-way, electricity meters: one to track how much electricity a seller takes from the grid for normal use, and another to monitor the energy they generate and funnel back to the grid.

If you were thinking that one bidirectional meter should be able to do the job of two unidirectional meters, you'd be right. Net metering is a process by which a single, bidirectional meter spins forward to track the electricity a seller takes from the grid and backward to meter the excess energy they produce. If you've taken out more electricity than you've produced at the end of the month, you'll owe the power provider the retail rate for that excess. However, if you've put in more than you've drawn from the grid, the power provider will pay you the retail instead of the wholesale rate for that excess energy.

Read on to find out how electricity is measured and how much money you might make.